100% Bonus Depreciation Restored for 2025: What Business Owners Need to Know

Business Taxes · BUSINESS 2025

The OBBBA restores 100% bonus depreciation for business property placed in service after January 19, 2025. Learn how it works, what qualifies, and how it interacts with Section 179 expensing.

One of the most impactful provisions for business owners in the One Big Beautiful Bill Act is the restoration of 100% bonus depreciation. After several years of phase-downs (80% in 2023, 60% in 2024), businesses can once again immediately deduct the full cost of eligible property placed in service after January 19, 2025.

What Is Bonus Depreciation?

Bonus depreciation (formally the 'additional first-year depreciation deduction' under Section 168(k)) allows businesses to immediately deduct a large percentage of the cost of qualifying property in the year it's placed in service, rather than depreciating it over several years. Before the OBBBA, the phase-down schedule had reduced this to 60% for 2024.

100% Restored: What Changed

The OBBBA restores the bonus depreciation rate to 100% for qualified property placed in service after January 19, 2025. This means the full purchase price of qualifying equipment, machinery, vehicles, and other property can be deducted in the year of purchase — dramatically accelerating tax deductions for capital-intensive businesses.

What Property Qualifies?

Qualifying property for bonus depreciation generally includes:

• Tangible personal property with a recovery period of 20 years or less
• Computer software
• Water utility property
• Qualified film, television, and live theatrical productions
• Improvements to the interior of commercial buildings (qualified improvement property)

Land and buildings themselves do not qualify. Most equipment, technology, vehicles (subject to limits), and furnishings do.

Bonus Depreciation vs. Section 179 Expensing

Both bonus depreciation and Section 179 allow immediate deduction of asset costs, but with key differences:

• Section 179 is limited to your business's taxable income (cannot create a loss)
• Bonus depreciation can create or increase a net operating loss (NOL)
• Section 179 limits have also been increased under the OBBBA
• For most businesses, bonus depreciation is more powerful because it's not limited by income

Many businesses use both strategies together to maximize first-year deductions.

Retroactive to January 19, 2025

Unlike most OBBBA provisions that are effective for the 2025 tax year in general, the bonus depreciation restoration is specifically retroactive to property placed in service after January 19, 2025. Property purchased and placed in service between January 20 and July 4, 2025 (before the law was signed) still qualifies for 100% bonus depreciation.

Frequently Asked Questions

Does 100% bonus depreciation apply to vehicles?

Vehicles qualify, but luxury auto depreciation limits under Section 280F cap the first-year deduction for passenger vehicles. Heavy vehicles (SUVs over 6,000 lbs GVWR) have a separate Section 179 limit of $30,500 and may qualify for bonus depreciation beyond that.

Can bonus depreciation create a loss that offsets other income?

Yes. Unlike Section 179, bonus depreciation can create a net operating loss (NOL), which can be carried forward to offset future taxable income.

I bought equipment in March 2025 before the law was signed. Does it qualify?

Yes. The 100% bonus depreciation rate applies to property placed in service after January 19, 2025 — so March 2025 purchases qualify retroactively.

Should I always take 100% bonus depreciation?

Not always. If you expect higher income in future years, it may be more advantageous to depreciate property over time to offset higher tax rates. A tax professional can model the optimal approach for your situation.